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There are problems in NY State and Illinois as well. Illinois has been in some sort of legislative standoff between the Republican Govenor who is trying to rei

There are problems in NY State and Illinois as well. Illinois has been in some sort of legislative standoff between the Republican Govenor who is trying to rein in pension costs and the Democratic legislature. NY State if I recall, has some sort of constitutional amendment that creates huge pension liabilities for taxpayers. These huge pension liabilities as well as increasing Medicaid costs means that students attending public universities in California, Illinois, and NY State have to pay higher and higher amounts of tuition, in effect subsidizing the pension funds and Medicaid.

snarf21 10y ago
All pension funds are pyramid schemes. We need to move to fixed contribution plans for giving people money for retirement. The existing schemes can only be propped up by more taxes or by slashing benefits.
- ec109685 10y ago
  Did you read the article? The pension was solvent before the benefits were increased, so not a pyramid scheme.
  - snarf21 10y ago
    I'm not trying to be antagonistic. All pyramid schemes start out solvent. That's how they convince more people to join. There is a simple test to see if any of these things are pyramid schemes. If no new money comes in and no new people participate, can all the payouts that have been promised be made? I think it is clear that pension plans don't pass this test.
    - ec109685 10y ago
      Yes, a properly funded pension doesn't need new money to pay out existing benefits. The new money coming is a down payment for the people who will eventually retire, not to pay out benefits for those who have retired. Also, Ponzi scheme is a closer match to what you are implying. Pyramid involves escalating returns based on recruiting new members "under you".
      - snarf21 10y ago
        If each persons money was able fund their own retirement then fixed contribution plans can only be better as there is no longer any pension fund to pay for. Also, I am implying that most pension plans are ponzi schemes. They depend on future people to make up for the short falls. A properly funded one would basically be just a managed fixed contribution plan. I don't know of any that are like that. I'd be curious to read about any that are.
kodablah 10y ago
It's happening everywhere, and not just at the state level. This is also occurring at the city level, see Dallas[1]. They didn't have enough money to pay out scared people that are all trying to withdraw now, though they have implemented stop gaps[2]. 1 - http://www.nytimes.com/2016/11/21/business/dealbook/dallas-pension-debt-threat-of-bankruptcy.html http://www.nytimes.com/2016/11/21/business/dealbook/dallas-p... 2 - http://www.dallasnews.com/news/dallas-city-hall/2016/12/08/dallas-police-fire-pension-board-ends-run-bank-stops-154m-withdrawals http://www.dallasnews.com/news/dallas-city-hall/2016/12/08/d...
- davidf18 10y ago
  From [1]: "This month, Moody’s reported that Dallas was struggling with more pension debt, relative to its resources, than any major American city except Chicago." Chicago is even worse off than Dallas.
nugget 10y ago
Illinois is the real time bomb. My prediction - California will eventually pair property tax hikes (from 1% to 2% on every property in the state; limit prop 13 basis to one property per person) with pension benefit cuts (10%; reduced COLA) to close the gap (after many articles like this one followed by much public wailing and gnashing of teeth). But once the political calculus is settled, at the end of the day, the money is there. California property taxes generate ~ $40 billion annually so you could double them and (factoring in a resultant decline in home prices and local economic activity) still pull out another $30 billion or so in annual revenue. But Illinois (Chicago) has much less ability to raise property taxes, which are already %-wise relatively higher on lower absolute property values, and the state's pension shortfall is significantly worse. The author doesn't mention it in this article but California's other major problem is Medi-Cal. Free health care for everyone in California below the poverty line. The Feds pay 95% of the bill currently under the ACA medicaid expansion but if/when they start to pay less then California has tens of billions of dollars in new liabilities to contend with. Combine one/both of these problems with another market crash - which would mean lower pension returns, but also decimate California's capital gains dependent tax collections - and it starts to look like a fiscal 'perfect storm'. I give Gov. Brown a lot of credit for talking about the need to build up a rainy day fund but I fear it's far too little too late.

snarf21 10y ago

All pension funds are pyramid schemes. We need to move to fixed contribution plans for giving people money for retirement. The existing schemes can only be propped up by more taxes or by slashing benefits.

ec109685 10y ago
Did you read the article? The pension was solvent before the benefits were increased, so not a pyramid scheme.
- snarf21 10y ago
  I'm not trying to be antagonistic. All pyramid schemes start out solvent. That's how they convince more people to join. There is a simple test to see if any of these things are pyramid schemes. If no new money comes in and no new people participate, can all the payouts that have been promised be made? I think it is clear that pension plans don't pass this test.
  - ec109685 10y ago
    Yes, a properly funded pension doesn't need new money to pay out existing benefits. The new money coming is a down payment for the people who will eventually retire, not to pay out benefits for those who have retired. Also, Ponzi scheme is a closer match to what you are implying. Pyramid involves escalating returns based on recruiting new members "under you".
    - snarf21 10y ago
      If each persons money was able fund their own retirement then fixed contribution plans can only be better as there is no longer any pension fund to pay for. Also, I am implying that most pension plans are ponzi schemes. They depend on future people to make up for the short falls. A properly funded one would basically be just a managed fixed contribution plan. I don't know of any that are like that. I'd be curious to read about any that are.

kodablah 10y ago

It's happening everywhere, and not just at the state level. This is also occurring at the city level, see Dallas[1]. They didn't have enough money to pay out scared people that are all trying to withdraw now, though they have implemented stop gaps[2]. 1 - http://www.nytimes.com/2016/11/21/business/dealbook/dallas-pension-debt-threat-of-bankruptcy.html http://www.nytimes.com/2016/11/21/business/dealbook/dallas-p... 2 - http://www.dallasnews.com/news/dallas-city-hall/2016/12/08/dallas-police-fire-pension-board-ends-run-bank-stops-154m-withdrawals http://www.dallasnews.com/news/dallas-city-hall/2016/12/08/d...

davidf18 10y ago
From [1]: "This month, Moody’s reported that Dallas was struggling with more pension debt, relative to its resources, than any major American city except Chicago." Chicago is even worse off than Dallas.

nugget 10y ago

Illinois is the real time bomb. My prediction - California will eventually pair property tax hikes (from 1% to 2% on every property in the state; limit prop 13 basis to one property per person) with pension benefit cuts (10%; reduced COLA) to close the gap (after many articles like this one followed by much public wailing and gnashing of teeth). But once the political calculus is settled, at the end of the day, the money is there. California property taxes generate ~ $40 billion annually so you could double them and (factoring in a resultant decline in home prices and local economic activity) still pull out another $30 billion or so in annual revenue. But Illinois (Chicago) has much less ability to raise property taxes, which are already %-wise relatively higher on lower absolute property values, and the state's pension shortfall is significantly worse. The author doesn't mention it in this article but California's other major problem is Medi-Cal. Free health care for everyone in California below the poverty line. The Feds pay 95% of the bill currently under the ACA medicaid expansion but if/when they start to pay less then California has tens of billions of dollars in new liabilities to contend with. Combine one/both of these problems with another market crash - which would mean lower pension returns, but also decimate California's capital gains dependent tax collections - and it starts to look like a fiscal 'perfect storm'. I give Gov. Brown a lot of credit for talking about the need to build up a rainy day fund but I fear it's far too little too late.